It's easy to blame Congress for the federal government's paralysis on job creation. But here are five job-creating options that lie squarely within President Obama's power, if only he is willing to pursue them.
- Nominate Janet Yellen to chair the Federal Reserve. This can't be stressed enough: The number one risk to job creation in the U.S. is a too-quick monetary tightening. Bond yields have already risen on the expectation that a Larry Summers-led Fed would mean tighter money. A Yellen nomination would soothe markets, creating an expectation that Bernanke-era easing policies and lower interest rates will last longer, driving investment and job creation. I'm not sure I fully believe Julia Coronado's forecast of 350,000 to 500,000 extra jobs if Yellen is nominated, but the effect would be positive.
- Approve the Keystone XL pipeline. The State Department estimates that the construction project would support 42,000 jobs during its construction period; over the longer term, the effect would be cheaper and more reliable oil supplies, and a marginal shift of world oil markets toward a friendly power (Canada) and away from more troublesome ones. The main reason to oppose the pipeline is because of its impact on carbon emissions, but Obama has a better way to contain those: A plan he laid out in June to use the Environmental Protection Agency's regulatory power to force states to cap carbon emissions. Unlike blocking Keystone, those caps can reduce carbon emissions in a way that generates revenue for state governments, which can in turn be spent in ways that foster job creation.
- Propose an infrastructure plan that isn't designed to draw Republican opposition. Democrats keep attaching tax-increase poison pills to their infrastructure plans and then acting surprised when Republicans won't support them. In today's low-interest rate environment, infrastructure spending should be financed with debt, not taxes. Obama should try again for an infrastructure bill without any revenue offset. As a sweetener, he should offer to repeal the Davis-Bacon Act, which forces contractors on federally-funded infrastructure projects to pay inflated wages. Davis-Bacon repeal would make infrastructure spending more cost-effective and more appealing to the Republican-held House.
- Let more homeowners refinance. The best time for aggressive action to fix underwater mortgages was four years ago. The Obama Administration has been held back by an unwilling Congress, but they also made errors of their own, including failing to replace Federal Housing Finance Administration head Ed DeMarco, a Bush appointee who has blocked some principal reduction efforts. This month, the Senate should vote on confirming ex-Rep. Mel Watt (D-N.C.) to succeed DeMarco. He should proceed with Obama Administration plans to offer more principal reductions to underwater borrowers and expand eligibility for the Home Affordable Refinance Program. That would get hundreds of thousands of additional homeowners spending less on mortgage interest and more on other things, creating jobs.
- Focus on making sure Congress doesn't create new fiscal troubles. One bright spot for future jobs reports is that our years-long experience with fiscal austerity should be ending: tax receipts are rising again with the (tepidly) growing economy, state and local governments are hiring, there are no more temporary tax cuts with looming expiration dates, and sequestration has been mostly implemented. The end of fiscal drag ought to mean stronger job creation in 2014, unless Republicans manage to get more spending cuts as part of a deal to raise the debt ceiling this fall. Obama's stance, correctly, is that there should be no further austerity. It will be easier to win on that issue if he prioritizes it over other politically challenging proposals, such as a Summers nomination or bombing Syria.
Yesterday, I looked at how last month's jobs report was disappointing and why we can't necessarily expect the numbers to get better anytime soon. But if Obama takes the five steps above, things should start looking a bit better.
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